Broadview Returns With a Healthier Balance Sheet

Broadview Networks is back from its prepackaged Chapter 11 surgery and ready to unveil its new look, emerging from an 11 week trip through chapter 11. With a new balance sheet in place, they hope to use the extra financial flexibility to invest in the cloud services market.

Broadview had announced its intentions to restructure back in August, and after a brief look by an Icahn affiliate it followed through back in August. As a result, the company's debt has been chopped in half to $150M of senior secured notes and a $25M revolving credit facility. Annual interest payments will be reduced by $18M.

Revenues for Q3 fell sequentially to $82.6M according to the company's 10-Q, filed late last week. Adjusted EBITDA checked in at $14.8M, so margins were pretty much steady at 17.9%.

Broadview certainly has a healthier balance sheet, but it does face the same structural issues as in the past: a declining base of traditional, lower margin CLEC revenues and a relatively small supply of fiber to fight it with. Like others, they are looking to shift their model to depend on more cloud-based services sold to their existing customer base, but it takes time to ramp such services.

One can't help but wonder, though, if that look they got by Icahn back in August isn't suggestive of further M&A potential. XO is still a possible fit, as are Earthlink and perhaps Windstream.